Changes US Lawmakers May Consider When Renewing the EB-5 Program

Last Updated on April 4, 2017

With the US Congress opting for a temporary extension of the EB-5 Program, immigrant experts and economic analysts anticipate lawmakers will introduce significant changes to the new program in mid December 2015.  This is the period when a further renewal is required for the program to continue.

Here are some of the areas for anticipated changes:

Prohibition on Gerrymandering of Districts

The EB-5 program has come under significant criticism for its emphasis on big-ticket investments in big cities like New York, Los Angeles and Miami.  The Program originally offered permanent residence to applicants who invest at least $1 million in a commercial enterprise and create at least ten jobs within two years of the investment.

Applicants were permitted to invest just $500,000 if the investment was made in a Targeted Employment Area, which was defined as an area with an unemployment rate that exceeded the national average by 150%.

Property developers and applicants resort to questionable interpretation of rules by combining census tracts to setup projects in urban and well-developed areas that do not suffer from high unemployment. This process, known as gerrymandering districts, has become very common with 80% of all EB-5 investments flowing into projects that rely in gerrymandering to qualify for the lower investment limit.

Lawmakers are expected to bar gerrymandering and require developers to use a single census tract when defining a targeted area under the program. Developers arguing in favor of the status quo have pointed out that projects in developed areas may create jobs for workers residing in impoverished areas suffering from high unemployment. However, lawmakers are unlikely to allow the existing process to continue in the revised Program.

Higher Investment Limit

Considering that the minimum investment limit has not been increased since the program was introduced 25 years ago, the revised EB-5 program is expected to require minimum investment of $800,000 for targeted areas and $1.2 million for commercial enterprises in other areas.

Combined with the prohibition on gerrymandering, applicants may see the minimum investment requirement rising from $500,000 to $1.2 million, which can be a deterrent for some investors. However, legal experts point out that demand is unlikely to suffer even if the minimum investment requirement is hiked.

Smooth Transition to New Rules

Lawmakers are likely to include grandfathering provisions to ensure those who had applied under the old rules don’t face retrospective changes after the new law comes into force. Since other countries like Australia and the UK have ensured introduction of new rules without any confusion or complications, the US lawmakers are expected to follow suit.

Monitoring of Creation of Jobs

Critics have long complained that the job-creation requirement of just ten jobs is too low to have a significant impact on the economy. The revised program is expected to introduce stricter requirements related to how creation of direct and indirect jobs are calculated. Since developers obtaining funding from EB-5 investors ensure creation of 20% extra jobs as a safety margin, a higher job-creation limit or stricter calculation norms is unlikely to affect the program’s popularity.

Stricter Oversight on the EB-5 Program

With a DHS report raising serious questions about the way the EB-5 program is managed, the USCIS is expected to gain more control over the process. Regional Centers are for-profit intermediaries that receive investments from applicants and lend the funds to real-estate developers at a significantly lower rate as compared to standard property development loans. Stricter oversight on Regional Centers may include a hike in the launch fee from $6000 to $20000, requirement of an annual fee, and new rules to minimize risk of fraud.

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About the author:

 

Colin R. Singer is immigration counsel for www.immigration.ca. He is one of Canada’s foremost senior corporate immigration attorneys. He is recognized as an experienced authority on Canadian immigration matters as well as the international residence-by-investment industry through investmentimmigration.com. He is a licensed immigration lawyer in good standing with a Canadian Law Society during the past 25+ years.